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02/27/2011

The Overdiagnosis Problem—Posner

A book published recently and entitled Overdiagnosed: Making People Sick in the Pursuit of Health, by three reputable physicians (H. Gilbert Welch, Lisa M. Schwartz, and Steve Woloshin), argues forcefully that the nation is spending too much money on preventive care. This is doubtless regarded as heresy in some circles: the orthodox view is that prevention is the key to economizing on the expenses of health care: “an ounce of prevention is worth a pound of cure.” The recent health care reform act seeks to promote preventive care.

Preventive care does reduce health costs in some cases, but not in all, and maybe not in most. The costs of prevention have to be weighed along with the benefits. And private and social costs have to be distinguished. Subsidy programs such as Medicare reduce the private costs of medical treatment to patients, but the social costs are not reduced; their incidence is merely shifted.

Generally, preventive care has two phases: screening and treatment. The former might seem inexpensive, both in monetary cost and in risk to health, but is not, and for two reasons: the number of people who do not have a condition that is screened for invariably greatly exceeds the number of people who have the condition, so that the cumulative costs of screening are high. And screening creates anxiety, both anxiety over the outcome and anxiety over what to do if the test for the disease in question is positive. An example is the blood test for prostate cancer. It turns out that a huge percentage of men have prostate cancer, but that most of the cancers are benign. The treatments have serious side effects, so for many (especially for elderly) men diagnosed with prostate cancer it is uncertain what the best course of action is. Another example of dubious preventive care is the treatment of mildly elevated blood pressure: blood pressure medicine has to be taken daily and of course must be paid for by someone, and has side effects though less serious ones than prostate treatments, while the benefits in reducing the risk of heart attacks or strokes are modest (unlike the case of highly elevated blood pressure). There are many other examples in which the net benefits of screening for medical conditions followed by treatment if the results of the test for the disease are positive are slight or negative.

The tendency has been to move the goalposts: to screen for lesser and lesser abnormalities, even though the lesser the abnormality the lesser the expected disease cost to the patient and so the less likely the screening and follow-up treatment are to provide net benefits. Moreover, mild abnormalities are far more common than severe ones, so that moving the goalposts greatly increases the number of persons who have to be screened. When the threshold for excessive cholesterol was lowered from 240 to 200, the number of Americans with excessive cholesterol increased by almost 43 million and all of them are recommended to take drugs to reduce their cholesterol, even though the benefits for persons who are not at high risk of heart disease for other reasons are highly uncertain—yet many of these persons are taking the drugs along with persons who can anticipate a significant benefit. The increased prevalence of screening and preventive treatment has increased the health awareness of Americans and by doing so has increased the innate anxiety that people feel about sickness and mortality.

Ordinarily we don’t question people’s consumption choices; and it might seem to follow that if people want to take, say, blood pressure medicine to prevent mild hypertension they should be assumed to be maximizing their utility and we should let them alone. But there are reasons to think that screening and treatment of persons who flunk screening tests are excessive from the standpoint of overall social welfare—that aggregate utility would be increased by reallocating many of the resources now used for screening and preventive treatments to other activities.

We can identify these reasons by considering the full range of factors, other than cost-benefit analyses that support particular forms of screening and preventive treatment. These factors are the incentives of medical researchers (many subsidized by government), health care providers (importantly including pharmaceutical manufacturers), medical malpractice lawyers, American cultural attitudes, our democratic political system, and patients who do not pay the full costs of their medical care. Advances in medical research enable more abnormalities to be discovered sooner—the PSA test for possible prostate cancer is an example—and to be treated. Physicians and other health care providers have an incentive to increase the demand for their services by creating new screening procedures and preventive treatments, although to the extent that preventive care does improve health (as much of it does), acute-care health providers face reduced demand for their services. But apart from dentistry, it is hard to think of areas of health in which preventive care has reduced the overall demand for treatment.

Although preventive care sometimes involves surgery, as in the case of prostate cancer and other cancers that may be benign, usually it involves treatment with drugs, and thus is strongly promoted by the pharmaceutical industry, often by advertising directly to the consumer.

Fear of medical malpractice drives physicians to order tests for low-probability conditions, lest they be sued for failure to diagnose a treatable condition.

Distinctive features of American culture include a strong commitment to business models of economic activity, a high correlation between income and prestige, competitive drive, and a rejection of fatalism. The medical profession, like the legal profession, has embraced a business as distinct from a professional model of service. In a business model, success is measured by profit. Physicians embrace opportunities for increasing their incomes by increasing the demand for their services.

Americans value longevity not only for the utility that additional years of life confer regardless of how long others live, but as a field of competition: prestige attaches to beating one’s contemporaries in the race to live as long as possible. And this turns out to be for many people a very cheap competition because other people are paying for their medical treatments. The subsidization of the old by the young in the Medicare program increases the demand for screening and preventive care by a politically prepotent voting bloc that has been able to shift most of its medical costs to others. Legal restrictions on exclusions in health insurance policies, and the tax subsidy of employer-provided health benefits, create further gulfs between the costs of medical care to particular persons and what they pay for it.

So not only is there compelling evidence of what Welch and his coauthors call overdiagnosis; there are good reasons to believe the evidence because the incentive structure for screening and preventive care makes overdiagnosis a theoretical prediction as well as an empirical reality.

Comments

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About 80% of all preventive services do not pay for themselves. But then appendectomies don't pay for themselves either -- in the sense of reducing over all medical costs. The real test is not whether a procedure lowers over all costs. It is whether the benefits (in terms of life expectancy and quality of life) outweigh the costs.

The statement about prostate cancers is not quite accurate. Benign prostate enlargement is not thrown up by the PSA screening. The PSA test often finds cancers that are malignant but which are not likely to kill the person - he will die of something else first. The problem is that there are no accurate ways of telling the difference between malignant cancers that can be left alone and those that will kill.
But the point that screening often leads to unnecessary treatment is correct.

The medical profession . . . has embraced a business as distinct from a professional model of service. In a business model, success is measured by profit. Physicians embrace opportunities for increasing their incomes by increasing the demand for their services.

The economic lesson (since this is an economic's blog):

Yet another example of market failure. Markets do not produce trust or desirable outcomes in health care, they "create anxiety, both anxiety over the outcome and anxiety over what to do," quoting Posner.

Further, markets produce dishonesty. For example, to hide that they are economic actors, doctors, when asked, will lie and falsely state that "Fear of medical malpractice drives physicians to order tests for low-probability conditions, lest they be sued for failure to diagnose a treatable condition."

If this were true, doctors would pay for tests out of their own pocket to avoid a potential malpractice claim. Show us an example of a doctor paying for a test?

The reader should apply Munger's checklists of the psychology of human misjudgment to get a better picture. As Munger shows, the twin evils in health care are: (1) man with a hammer; and (2) incentive bias.

Last the post falsely describes what Obamacare means as to preventive health care. Far beyond the over testing described, health care costs in the U.S. are driven by three factors, which overwhelm testing in terms of costs: (1) chronic diabetes: (2) excess weight; and (3) alcohol abuse. This is what Obamacare wants to tackle.

Judge Posner does an excellent job of identifying most of the key variables that have to be weighed in the preventive care dimension of healthcare. I wish he would have also identified the relevant variables that should be considered in a debate of the best method of rationing, and weighed their pros and cons. The broad choices are: let markets ration or have bureaucrats do the job, whether in government or large private sector companies or both.

Obamacare has chosen the very last on the premise that (1) economies of scale are the major desirable force with which to bring down costs; (2) private implementation and management is best; and (3) government nevertheless has to (a) regulate and drive performance and thereby also drive outcomes, and (b) keep the system honest. In this model healthcare will be managed and rationed through a partnership between large corporate entities and government. In this system doctors will be largely employees and advisors.

The model was explained best in a lecture last March by one of its main advocates, and Obama advisor, David Cutler, Harvard Professor of Applied Economics, at (there are also papers of his in the literature that can be found though Google):

http://www.c-spanarchives.org/program/id/220717

The most recent evidence that the incentives in Obamacare to bring about this model are in fact working is provided by Doctor Lloyd M. Krieger in an opinion piece in The Wall Street Journal of February 23:

Only time will tell whether this healthcare model will actually deliver the desired outcomes. My concerns, laid out in some depth in a comprehensive model of social change I sent to Judge Posner and Prof. Becker some three weeks ago, are that, while definite cost advantages should materialize, these will happen at the expense of innovation and flexibility to further change. These and many others need to be balanced carefully.

Some innovation will be lost as the loci of potential innovation inherent to a larger number of smaller healthcare providers are reduced. Among the incentives to bring about large medical conglomerates the new law contains disincentives to small private clinics and independent doctors. These disincentives will no doubt be reinforced by the fee structure for Medicare and Medicaid that has received most attention: outcome based fees. These will require medical attention by coordinated teams of specialists, which large hospital and medical complexes are better equipped to deliver.

As to flexibility, it is almost axiomatic that in the aggregate smaller business units tend to be more innovative, and that when they fail they can be replaced much more easily and with less damage all around. Larger healthcare conglomerates will inevitably become more bureaucratized and rigid. That is one of the disadvantages of economies of scale. Its benefits come through a specialization of functions but these then have to be coordinated with an ever increasing number of rules that are difficult to administer and change. Worse, when mistakes are made, as will be the case inevitably, these will tend to have much larger effects.

These and many more variables need to be considered in the continuing debate over how best to deliver medicine. It would be nice if two notable minds like those of Prof. Becker and judge Posner would elaborate on the pros and cons and then engage in their weighing.

Mark McCormack, a bright lawyer from Yale, always counseled, "First gage the results, then gage the effort." You write of "the desired outcomes" but don't mention what they happen to be.

Before responding to your comments, in fairness to you, let me ask, Exactly what do you have in mind as desired outcomes?

Second, apparently this is part of a larger picture on your part of a perfect conservative world you have in mind, as you have "laid out in some depth in a comprehensive model of social change." Seems to me that you ought to cough up that information as well.
Include please, what your goals are for the next 5 and 10 years in increasing the wealth of the richest .5% of Americans, at the expense of the remainder?

What a strange and seemingly superficial essay! Posner treats our whole health care situation as if it were one homogeneous system, which it obviously is not. If we've not studied the differences in diagnoses and outcomes from our many varied H/C "options" it's something we should surely do, and especially so as our outcomes are hardly world class.

Perhaps Posner is writing about the H/C common to himself? That of low deductible, relatively comprehensive care including eye glasses and dental that is common with many who work for governments and larger corporations. Similar access is accorded to our military employees.

But Medicare? Here in Alaska, as seems the case in many other regions while the services of specialists is well compensated, there are FEW physicians who will take on new Medicare patients as they are a drag on the "biz model" discussed.

Then the 50 million who've no coverage? and those for whom a substantial annual co-pay is spent by the patient? Are they likely to "overuse" the system? Have we studied the outcomes of those likely to defer checkups, and dental or optical care? I think we have and find a strong correlation with lower income folks dying sooner and having many more health problems than those with good coverage and regular check-ups.

Further, for those such a Posner and our "conservatives" who glibly treat H/C as if it were subject to the same cost-benefit ratio as deciding whether to buy a used or new car, let's dig a bit deeper and find out why US diagnoses run three to five times higher than is the case in Japan. Indeed! Inflated costs such as those of the US ARE bound to skew cost-benefit ratios.

And the "case" for not doing inexpensive PSA screenings due to "anxiety" and not being alarmed by slow growing cancers? Whew! This being an econ site, let's ask "junk bond king" M. Milken who badgered his doctor into testing despite his age being forty-ish. Or Intel founder and long time CEO Andy Grove whose screening found a fast growing cancer. Both men did good work in carefully analyzing their options and sharing those results, and outcomes with the public. Even were the screening to discover "no hope -six months" wouldn't it be well worth knowing? And of course, there is that fine feeling as one walks out after a check-up with a cheery "All is well" that is worth something too.

Gawd! are we all to be but minions in a "market based" machine to be tossed aside once the "cost benefit" no longer pencils out at the exorbitant H/C prices extorted in the US?

And lastly, having recently attended the 'celebrations of life' of a few friends having departed much too soon, one perhaps taken down by cancer too late diagnosed, I don't recall any emotion related to Posner's "........but as a field of competition: prestige attaches to beating one’s contemporaries in the race to live as long as possible."

"These will require medical attention by coordinated teams of specialists, which large hospital and medical complexes are better equipped to deliver."

.......... Yes. It's well past time for small doctor shops to go the way of other horse a buggy enterprises of long ago. Perhaps, the "family GP" is an exception, there is still that point were "We have to make some tests" and the tests are far more efficiently provided when costly machines are shared among many.

And:

"As to flexibility, it is almost axiomatic that in the aggregate smaller business units tend to be more innovative, and that when they fail they can be replaced much more easily and with less damage all around."

......... Under most of the systems being considered, even the half-step affectionately termed "Obamacare" there would be room for relatively small groups of providers to fit in. As for innovation and flexibility, it seems we're well past the "Edison era" and that innovation today is mostly a large team sort of enterprise as is the pursuit of excellence and high standards in H/C delivery.

Most who pose as "conservatives" these days favor the cost compression afford by large corporations and indeed spend much of their time trying to beat down the wages of other working folk. It's likely that, once we get the model right, that large organizations will replace the "Mom and Pop" medical providers able to send out their own inflated invoices and carry high the high (per patient) overhead of clerks billing and tussling with today's insurance parasites.

Jack: Figures usually quoted about prostate cancer are that of those with a positive biopsy you need to treat 50 - usually by surgery - to prevent one premature death. The other 49 would not die of the disease.
Many, perhaps most, of those treated would be sexually impotent and some would be incontinent as a result.
Would you be willing to accept the likelihood of impotence and incontinence to avoid a 1 on 50 chance of premature death? And remember that despite cases like Milken and Grove, prostate cancer is usually a disease of old men. A majority of men over 80 will have the cancer though will likely die of something else.
In the end, what is being argued about is whether men are giving informed consent - knowing these odds - before the PSA test and the biopsy. I suspect not in many cases - I know a number of men who have had prostate cancer surgery and they all say "my urologist saved my life" when the chances are he didn't.
So, as my T shirt says "I think you'll find that it is a little more complicated than that."

Ken: Thanks, and know most of that........ though others may differ on the numbers. Surely knowing later is not better, and not what most would favor for themselves.

And Ha! under our pay (mightily!) for procedures system I typically advise my friends from being diagnosed by surgeons; no telling if payment on the condo or airplane are late. But once diagnosed those who are good with the scalpel who do many operations have better outcomes than you fear. Also some "grandpas" may favor more years taking a kid fishing as compared to dying earlier but potent.

Also, and you may be familiar, there are Theraseeds and other directed radiation therapies.

I left out a few more reasons for detection early enough to make some form of treatment a viable option. We (of American medical excellence?) typically make progress by trying. Perhaps a broad data base of testing and outcomes can be crossed with DNA that might shed light on why seemingly undifferentiated cancers grow faster than in some than in others. Research seems one semi-valid argument for US H/C costing twice that of most similar nations.

On a larger perspective what are we doing? If this richest of (large) nations in (per capita) the richest era in history to maintain its leadership in medicine and democracy, are we to turn as Posner suggests, to MORE H/C rationing by wallet than already is the disappointing case? Are we Americans simply losing our nerve?

None of us expected any answers from the GOP, so his confirming that he doesn't know that to do is no surprise.

The introduction of the report has 3 full pages of acronyms, alone.

We are so far from the basics that the farce developing in Washington DC is beyond madness. While Rome burns, Obama and the Senate Democrats race each other to display who most lacks leadership skills.

We all know how this is going to play out. Someone will call the GAO report writers up to the Hill for a hearing where we will get 2 minutes of TV time asking a question for nightly news back home.

Obama ought to demand that Congress sit in session for a month solid, passing every suggested reform and unless that happens, he isn't going to sign the CR

Jack, you make important points. Let me comment but keep in mind that I am just trying to balance effects. What someone chooses is a matter of personal preference; hopefully from a large menu like today. And yeah, my theories are not necessarily correct, they are just that, theories.

What is important is “that once we get the model right…large organizations will replace the ‘Mom and Pop’ medical providers able to send out their own inflated invoices and carry the high (per patient) overhead...” That is the purpose of the new law.

But notice your crucial caveat: “once we get the model right.” Unfortunately when organizations grow too large, they become rigid, and are less able to change. More people are hurt as a result of large organizations not getting “the model right,” than from many smaller ones failing.

You may argue that with better science large organizations will be able to do better. Unfortunately what better science does is create even larger and more complex organizations that eventually also mess up. That happens because even science learns by trial and error; they just have a better methodology but they still have to test new theories with real life experiments.

About innovation and whether you need large teams. No doubt that is true of many innovations like the internet. But look at Microsoft, Apple and Google. All three started as garage outfits. Microsoft, however, is beginning to get stodgy and making larger mistakes while others make inroads into its core business. Imagine the effects if Vista had been a medical treatment instead of software that resulted in slow computers.

My point is simply that constant churning among small organizations in the long run and in the aggregate results in more innovation and adaptability with less pain. That is a lesson of history and it is also how complex open systems regulated by feedback behave. My model is based on both.

By the way, I get most of my medical treatment in a large medical complex. I don’t know how the doctors are remunerated. The complex has had its ups and downs, runs the doctors ragged, and I have suffered as a consequence. I like most of my doctors but some I suspect run tests because it’s their specialty—they have a hammer. On the whole I can say that my treatment is average. If I had a lot of money I would look for more boutique-like treatment.

Still, and even though I don’t use them, I like having choices. I figure that if necessary I can use my savings to find a better doctor to manage the specialists. Unfortunately those choices are beginning to disappear. You identify why: a constantly increasing number of doctors are refusing to see Medicare patients. This is particularly true of primary care physicians who would be the ones to help me better manage my personal situation.

So you see, I have mixed feelings. There is no silver bullet. The new law scares me. It foments large conglomerates regulated by bureaucrats. That will be good for those at the bottom but it will come at a price. I would have preferred many small players competing aggressively with each other coupled with a sound safety net. Both have costs and benefits. But like the Founding Fathers, I suspect concentration of power and prefer deep and extensive checks-and-balances.

What we have here appears to be an argument between two Medical Philosophies regarding disease and its control and their Cost vs Benefits. Those two are, Preventive Care vs. Acute Care and which is less expensive over time. As for Preventive care, it can and should reduce the incidence of disease and the level of care needed when the disease or condition advances to an Acute state requiring massive (and costly) intevention to save the patient. Thus saving money, but the long term costs involving Preventative Care may very well exceed the cost of large Acute care intervention, but there doesn't seem too be any real cost data available.

Now raising the issue of "Overdiagnosis" in Preventative Care, meaning, that the preventive intervention was not needed due to the fact that the medical issue would not end in a situation requiring Acute Care. Once again, there is no data supplied with which we or the Medical Community can draw an inference. Yes, it may true or then it may not be true, we just don't know because the facts are unavailable.

If anything, research and data collection needs to begin now, so that in the future we have the data and facts available to make an informed decision both philosophically, on medical technique, and on costs and benefits on this important Medical and Health topic.

As for me, I'm going to follow the advice of my Doctor and follow the regimen for any and all chronic conditions that may crop up. Such as, Hypertension control, Hypo/Hyperglycemic control, various cancer screenings, Colonoscopies etc, etc. Remember, "Forewarned is forearmed". Even if I might very well fall into the category of being "Overdiagnosed". "Better safe than sorry".

Ken Thanks. As you may know PSA can give a false (high) reading due to infections or some other cause. I know of a case where the high reading led to the next step of a biopsy of that tender area. And Ha! not many would "overuse" that procedure!

NEH: Agreed. Stats on preventative vs acute are bound to be difficult to document in the best of cases. What we need to understand is that, again, we've two "Americas". One of pretty good, though costly, access to routine H/C (that is perhaps the group Posner fears being "over diagnosed") and that most likely compare favorably with longevity and standards of overall health with those of nations who've long enjoyed universal H/C.

The "other America" is likely where our poor showing in the world derives from. We KNOW for example that poor, or no, prenatal care increases infant mortality (not too "costly" eh?) and the incidence of premature births -- sometimes a million bucks.

In the group of no coverage, poor coverage, higher deductibles than one's income can stand, etc. the "problem" of "over diagnoses" or "over-usage" doesn't exist. Instead it's the, costly, problem of using the ER as a makeshift, highly inefficient, often too late, outpatient clinic.

In that "America" the H/C delivery systems of Canada, UK, the EU and others likely looks pretty good, despite the flaws typically over-publicized by the millions spent by our insurance parasites to insure their own, costly, existence.

Lastly -- as "conservatives" center the "debate" on "cost/benefit" what are we using for "benefit?" Are we looking over the Workmen's Comp charts for the value of a leg, arm or a life shortened by "saving a buck" by skimping on diagnosis and early treatment? Aah, yes "better safe than sorry" when it's us or our loved ones.

BTW why is it so rare to hear conservatives use "cost benefit" ratios when the next, often pork-laden military hardware billions are being "debated?"

Jack, As for the high cost of American Health Care, from what I've gotten from Med. Professionals involved with care and billing it's due to the use of massive Acute Care Intervention in the last six months of life. The family demands it, even when there will be no positive outcome and hence the Instituions have to provide it. It also has become tied too many of the high tech interventions that have come on line as of late. The problem has and will continue to be massive inflation in the Medical and Insurance Industries, but this never seems to get discussed. It's raises the specter of potential "Price and Wage Controls" to control the inflation.

As for the two tier health care structure that is developing, those who have access to Insurance and money to cover their expenses and those who don't; I'm in complete agreement.

Cost vs. Benefit at the DOD? It functions on the concept of no more Pearl Harbors (never mind the Twin Towers) and National "Security" is sacrosanct. No matter what the cost. Never mind the fact that all of the conflicts we've found ourselves in since WWII have essetially been "Boots on the ground - small arms in their hands" types of conflicts. As for the Arms Race that's over and President Eisenhower (and he should know the Military and its mindset) tried to nip it in the bud with his warning about being wary of the Military-Industrial Complex, but that all fell on deaf ears...

NEH -- this being the site of a couple of economists, let's first agree that A. the economic of "supply and demand" don't work very well when "shopping for a good deal" in an unknown minefield for one's self or loved ones B. That third partying the costs to insurance companies is a clumsy, perhaps useless, even counter-productive means of cost compression. C. And........ that despite Posner's suggestion of higher copays, it's not likely to work any better.

If one has spent $100 for five minutes of GP time and the guy prescribes a catscan, or seeing a heart specialist for a $50k plus set of stents, one is likely to do the doc's bidding unless the copay is so onerous that it IS in effect rationing for those of thinner wallets. As you, for my part I'm not too interested in making H/C "work" on the backs of the lower income and poor.

Our system seems to be based on Doc's as gods as if the outcomes of most of our care pivoted on the talented hands of specialists of world class reputations, but then how explain catscans and other routine diagnostics costing three to five time those of Japan (as I posted) even though much of the "reading" is outsourced to India and other low wage venues? Something HAS to give here, as there is NO way we can finance soaring H/C costs on stagnant wages for most of us.

(On stagnant wages, let's consider those millions of boomers now retiring with many having just the average $1300/month of SS, of which $100 goes to Medicare and more to prescription drugs. Not much margin to absorb the H/C costs of an aging body.)

I had some hopes (during "Hillarycare") that a market based system might evolve from universal voucher financing with HMO's competing for subscribers much as airlines once competed, pre-dereg, on features and quality of service offered. There would have to be a contract or "patient's bill of rights" for the basics. Ideally, then, perhaps naively, they might compete by cost-compression within (a bit like a car mfg tries to control costs but also must come up with a quality product to sell) and offering more for the subscriber's dollar etc. But........... is the tension there between profiting and serving likely to be better than something not far from single payer?

And Ha! the open wallet for DOD and Ike's prescient warnings? I do kinda "mind" that we spend as much as the rest of the nations combined and gear up as if we had WWII or "cold war" adversaries worthy of maintaining thousands of nukes and the systems with which to deliver them. As we do "police the world" with conventional arms and well know that it's only boots on the ground that holds territory or the peace, it seems WE would be the greatest beneficiary of speeding the multi-lateral build down of nukes to zero and making ALL that is related to their construction and delivery contraband. I think the world could enforce such a policy today.

Pearl and WTC? Poor intelligence, diplomacy and arrogance?

Weren't we naive bumpkins to have had the Pacific Fleet holed up at Pearl when carriers were being added to the fleets? After we'd cut off oil supplies for their expansionist policies? The Japanese were similarly arrogant and naive as, with WWII tech, the Americas were impregnable fortresses and the best they could have done is lose most of their troops and hold Pacific islands........... for a while. The far more powerful German military could not cross the channel to invade England; the logistics of crossing either the Atlantic or Pacific with enough power to mount a "Normandy" at Boston or LA were impossible.

WTC? Makes a joke of our armed "might" doesn't it? As did the IRA when the Brit Empire was at its apex. We were warned by EU and Israel of the need for hardened cockpit bulkheads, and also warned of the eminent threat of AQ. It's unlikely that having 700 plus, pork gobbling bases around the world provides us with more security than would screening 20 somethings for prostate cancer provide more health security.

In the past we could shrug off "a few percent of GDP" but today the percentage is higher and nearing half of federal budget we can no longer afford (Ha! unless we went back to traditional marginal tax rates) and we'll have to learn to get along in the world with, perhaps a smaller, but smarter hammer.

Jack, you make important points. Let me comment but keep in mind that I am just trying to balance effects. What someone chooses is a matter of personal preference; hopefully from a large menu like today. And yeah, my theories are not necessarily correct, they are just that, theories.

A: I'm not sure about "large menus". What I see is that when we're fairly healthy we don't even want to waste the time to see a doc. When we're sick we do. One of the major reasons for risk pools is that of it being an unknown when we, or a kid, requires H/C services that are beyond the financial capabilities of 95% of us.

JJ: What is important is “that once we get the model right…large organizations will replace the ‘Mom and Pop’ medical providers able to send out their own inflated invoices and carry the high (per patient) overhead...” That is the purpose of the new law.

X: But notice your crucial caveat: “once we get the model right.” Unfortunately when organizations grow too large, they become rigid, and are less able to change. More people are hurt as a result of large organizations not getting “the model right,” than from many smaller ones failing.

A: Agreed. Seeing how we emerge from what seems to me the most cobbled together lash-up of an insane medical system, is difficult. But consider large orgs, say Walmart or McD's have the wherewithal to try something in one or a few markets and compare the results with those of other stores. Huge Intel made a biz of making each past product obsolete, MSFT bought up many competitors, but still stays creative, perhaps out of fear of Google which charges ahead, perhaps out of fear of Facebook eating part or all of their lunch.

A:Do you see the current "insurance" model spurring creativity? or making med care more beneficial or efficient?

X: You may argue that with better science large organizations will be able to do better. Unfortunately what better science does is create even larger and more complex organizations that eventually also mess up. That happens because even science learns by trial and error; they just have a better methodology but they still have to test new theories with real life experiments.

A: Yup! And Big Pharma the biggest of all? And isn't it the case that small outfits are simply not going to be able to invent and certify new drugs. Then down, say at GP level? we used to go to some one or two guy shops, right? and who knows whether they stayed up on continuing ed? Probably didn't. In New England area there are groups cooperating to find Best Practices by sharing (what they never shared in the past) their approaches and studying the outcomes. I suppose that could happen via a loose alliances. but the day of the crusty old single practitioner are, thankfully, behind us.

About innovation and whether you need large teams. No doubt that is true of many innovations like the internet. But look at Microsoft, Apple and Google. All three started as garage outfits. Microsoft, however, is beginning to get stodgy and making larger mistakes while others make inroads into its core business. Imagine the effects if Vista had been a medical treatment instead of software that resulted in slow computers.

A: Haha! Gawd! Vista! So what's wrong with being in a wheel chair on a muddy road with a flat tire? But! Truth is MSFT, I suppose, wisely? is working its near monopoly more than trying to advance the art. Vista meant your old Office 2000 had to be replaced on a per computer basis overseen by Big Brother. While insurance parasites may control large fractions of the market, I'm not arguing in favor of providers (or anyone else!) having MSFT's degreed of consolidation. (Shame on Anti-trust!)

My point is simply that constant churning among small organizations in the long run and in the aggregate results in more innovation and adaptability with less pain. That is a lesson of history and it is also how complex open systems regulated by feedback behave. My model is based on both.

A: I'm largely with you here. Though MOST of what medical care is, is that of providing to many what is commonly known. Given the costs of cancer, and the massive costs of Alzheimer's as boomers, many otherwise healthy, approach 80, and other diseases affecting billions around the world there is, and will be plenty of incentive for new drugs, nano-tech and surgery techniques. A sector gobbling 17% of US GDP is certainly one to attract innovation!

By the way, I get most of my medical treatment in a large medical complex. I don’t know how the doctors are remunerated. The complex has had its ups and downs, runs the doctors ragged, and I have suffered as a consequence. I like most of my doctors but some I suspect run tests because it’s their specialty—they have a hammer. On the whole I can say that my treatment is average. If I had a lot of money I would look for more boutique-like treatment.

A: Interesting. I'm typically a VA patient where docs too are fairly busy. What is great there is that they "went electronic" a dozen or more years ago. That means, even seeing an unfamiliar doc they've my entire record in front of them replete with reminders for periodic checks, meds, allergies and that record exists everywhere in the US and most likely at each of our 700 foreign bases. Prescriptions are clicked on, the computer checks for "typos" like prescribing unusual doses and conflicts with other meds, and zapped to the prescription window. Refills are mailed from a huge warehouse in KS. Paper work? Though some of the people may not know me, the system does, and all I have to do is show a card or give them last name and last four SS digits.

By contrast, how often do those going to private docs fill out four repetitious pages, which some clerk then enters into their billing/insurance system......... and a few weeks or months later the same is repeated.

Still, and even though I don’t use them, I like having choices. I figure that if necessary I can use my savings to find a better doctor to manage the specialists. Unfortunately those choices are beginning to disappear. You identify why: a constantly increasing number of doctors are refusing to see Medicare patients. This is particularly true of primary care physicians who would be the ones to help me better manage my personal situation.

A: Yes........ here too it's a "problem" getting Medicare GP's while many specialists are WELL compensated. I don't know it Medicare "pays too little" but, if a doc only has his time to sell, in a two tier system surely the GP who typically earns much less than surgeons et al. would rather see the higher paying patient.

A:Comes now a larger organization that hires their docs on salary and scales up to serve all comers?

So you see, I have mixed feelings. There is no silver bullet. The new law scares me. It foments large conglomerates regulated by bureaucrats. That will be good for those at the bottom but it will come at a price. I would have preferred many small players competing aggressively with each other coupled with a sound safety net. Both have costs and benefits. But like the Founding Fathers, I suspect concentration of power and prefer deep and extensive checks-and-balances.

A: Agreed that it's not easy! And lots of models, eh? Airlines were deregged and competed to the point of bankruptcy, though others have risen from the ashes. Banks were deregged and allowed to "compete" across state lines and run amok. The once invincible "Big Three" car companies became the broke two and staggering one. But! as many conservatives appear not to understand, D E M A N D drives all and DEMAND is wants and needs combined with wallet, so be it autos, plane rides or H/C that gobbles 17% and rising of GDP there will be providers, entrepreneurs and innovators.

Jack, a couple of questions. First, how did you get the blog to accept such a long comment, 7000+ characters? It rejected mine until I had cut it to below 3,500. Or did I originally have a word that it did not like?!

Then, how do you figure that 95% can't afford the current H/C system? 95%?

As to innovation, it happens much better when there is competition. It has to do with survival.

Finally, you mentioned airline deregulation. Look at how many more services are available and the prices are dramatically lower in constant terms.

You need to get a more positive outlook on life! There are many good things still left!

Xavier: On posting my far too long post; it seems they've a timer here -- haha! ie limiting long thumbsucking posts. You have to reload the page (perhaps save first) and then type on character, then post.

Clarification:

X: Then, how do you figure that 95% can't afford the current H/C system? 95%?

J: One of the major reasons for risk pools is that of it being an unknown when we, or a kid, requires H/C services that are beyond the financial capabilities of 95% of us.

A: That like auto insurance we spread the costs of relatively rare but costly calamities over many. 95% are those who'd be financially ruined IF they could write a check for major hospital events, premature births or inherited problems. The question does bring up the issue of where the line crosses from "insuring" against huge costs, and where it's a system of prepaid H/C, as is the case for the "well-insured" today. Then, relating to Posner, the next question is that of the relationship of affordable, routine, "preventative" care and its effect on

A. longevity and quality of life

B. avoiding some of the costly effects of skimping on preventative and or drugs that control many chronic illnesses.

C........ and extending the time in which one is productive in industry, the community or family.

X: As to innovation, it happens much better when there is competition. It has to do with survival.

A: Maybe. But first let's divide "H/C into the routine delivery most of us experience -- perhaps 80% of the costs? Basically "fee for services rendered" (And by any measure becoming too costly -- by comparison to other nations or in absolute percentage of GDP gobbled.) The innovation side IS more like "Google", though we should not forget the tremendous contributions from basic research provided by the NIH, universities and other countries.

Wouldn't we agree there is plenty of market incentives for new drugs and procedures, except perhaps difficult illnesses affecting the very few? Currently and in the future the best hope for cost containment? A drug or tech that would delay Alzheimers for five years would save enough to pay off CA's $25 billion deficit. A cure enough to make a major dent in US deficit.

X: Finally, you mentioned airline deregulation. Look at how many more services are available and the prices are dramatically lower in constant terms.

A: I was trying to depict a method of competing for government H/C vouchers. Basically, trying to combine "single payer" with a market based competition, rather than the Medicare system of paying a fixed amount per procedure -- which has to be cumbersome, distortionary (a profitable procedure vs a life style change? or prescription?) and always behind the times. For the voucher each would hold, companies large or small would compete on reputation for quality and amenities much as the airlines in those pre-reg days did.

Yes -- dereg changed the game in many ways. Today, and the travelers wallet does benefit, they compete on price and "discover" where the equilibrium between being hauled like cattle and price exists -- for most.

The "dereg" like most, made some mistakes too, such as not "dereg-ing" airports, ie it costs about the same to land during prime time as in the less desirable hours which is taxing the hub and spoke system generated by dereg.

We probably don't want a H/C system as viciously competitive on price, and the airline biz is a curious one in terms of "free markets" as, for the most part, whether facing bankruptcy or not, the FAA is the "quality control" on the safety of the planes, pilots, attendants, and passengers.

X: You need to get a more positive outlook on life! There are many good things still left!

A: Hey, I am positive! And greatly looking forward to the day when those of today's "right" actually take an econ course and begin to understand the principles of capitalism they claim to idolize! In the arena of H/C where -- as Posner points out the incidences may be rare but the "cost" to the individual infinite, "free markets" and harnessing the power of capitalism to efficiently allocate resources is next to impossible; the reason we have this mess, and others have single payer.

Jack, Actually, I think one is trained as a Sociologist and the other as Lawyer/Judge. As for their standing in the Economics field, it comes from the intersection of their different training in their disciplines of Sociology and Law and Economics. Hence the rise of "Law/Sociology and Economics" as a discipline.

Supply and Demand? It's a powerful tool of analysis, but that's all it is, a tool. Most times when it comes to using it, most don't fully understand its combinations and permutations that can be either Elastic or Inelastic. Both on the Supply Side or Demand Side or both. Most of the time you'll see the S/D side analysis fouled up because the model of analysis doesn't really take into account the realities of Elasticity or Inelasticity in the Economic Phenomena at hand. Politicians are noted for this and so we end up with policies that ineffective or downright destructive.

Jack, a lot of food for thought and I may have to get back to you. In the meantime a few things seem to deserve some attention. First and foremost, you need to explain to me your seeming fixation and large preference for government solutions. I do not question that there is a role for government but I do believe very powerfully in the caveats of Madison and the other Founding Fathers. I don’t trust excessive concentrations of power and believe in checks-and-balances.

One other thing that I have not addressed is a strong belief in the power of a good healthy value system, one evolved from a tolerating and freedom loving community, from the give and take of ideas. You and others in these pages knock big business a lot. It is true that many managers have acted badly but the great majority, at least in my day, had very strong positive values. And it is also true that those values are being lost. In a paper I wrote on the financial crisis—I happen to be something of an expert on the subject—I attribute some blame to that loss of values.

Still, I just don’t see how government can provide the values that are the ultimate check on our behaviors. It is not a right or left thing. It is simply one of trust about who knows better. Do we trust five justices in Washington to determine what is best for all of us? And what of the opinions of the other four? I much rather work out the differences and compromises at the local level among people who know better the circumstances of the community.

And I must come back to the paramount importance of toleration and compromise (something we may be losing with other values if some of the entries in this blog are any indication). As I’ve noted, I spent fifty years developing a model of how societies change, of which the last three to five have been dedicated to reading history in an effort to test the model. In a most fascinating twist I recently cross-referenced two authors with results that I am having trouble believing even though they validate very powerfully one component of my model.

In my model innovation, whether of products or ideas, results in new outcomes that are perceived very differently by different people. For any innovation to work and take hold throughout the society there has to be a reconciliation of those perceptions. Reconciliation requires compromise, and to compromise people have to remain open minded to the ideas of others.

Now, Ian Morris of Stanford in his 12,000 year survey of history, “Why the West Rules—for Now: The Patterns of History and What They Reveal about the Future,” shows how civilizations over that very long period kept reaching a social development ceiling before falling back again. That ceiling was finally broken through by the West sometime after the 15th and 16th centuries and for sure after the 18th.

After almost finishing Morris I picked up “How the Idea of Religious Toleration Came to the West,” by Perez Zagorin (by the way, I first came across this book in one of these blogs!). In the very first chapter he makes two crucial points. First is that he considers toleration an innovation that may be even more important than the invention of liberal and democratic societies. Second, he makes the case that “toleration…played a major role over time in widening the scope of freedom of thought and expression in areas other than religion.”

When I link Morris, Zagorin and my model I have to wonder whether and to what extent Zagorin’s toleration is what made possible for the West to finally penetrate through Morris’ ceiling. If so the conclusions can be immensely powerful. They validate my contention that for innovation to take root people need to be more tolerant of divergent views and willing to enter into a sustained dialogue aimed at compromise and reconciliation. I never accepted, any way, that some people as a group or over periods of time are smarter than others. I always felt that what kept ideas from taking root was a sociological and communication phenomenon. Okay, so much for values, at least for now.

One other thing that I suggest you, me, keep separate throughout any dialogue on H/C is the difference between real insurance and regular maintenance. You begin to make that distinction yourself in your latest entry. Thus, I think that the government vouchers that you refer to, if I understand them correctly, could work, as you suggest, for allowing markets to regulate consumption. But they probably would work only for regular H/C maintenance—and that, by the way, would go a very long way in combating the free riders in the comments to the Becker blog. For contingent major costs, which should be the sole domain of insurance, I think safety nets would be required.

In the other blog I suggested that we keep the solution to the problem of the currently uninsured separate from the attempt to control costs. They are two entirely different issues although of course they overlap to some extent. I suggest that we also keep insurance separate from regular maintenance. Of course nobody really free rides when it comes to unexpected major illness, but they sure free ride on regular maintenance. As always, it is the edges that pose the larger problems but these can be addressed more fruitfully by keeping the two separate.

By the way, while writing the last two paragraphs I begun to see a glimmer of a possible solution to the problem of fees, and how pay per visit or procedure versus results based fees may possibly be handled. I have struggled with this for a long time. Thus, for instance, how do you determine how many sonograms are okay during a pregnancy? It is a judgment call based on the general health of the mother, and I have seen for fact how these are abused by mothers who just want to feel good and doctors playing it safe against any possible lawsuit. These could be dealt with through the vouchers (and tort reform). I never understood why a pregnancy should be the subject of insurance unless of course things go wrong.

Okay, now to test your suggestion on how to deal with the length of a comment!

The evidence is substantial that this characteristic is genetic or substantially so. Check out the New Scientist article, "Two Tribes: Are your Genes Liberal or Conservative?" and many articles following, since.

All of the big five personality traits are highly heritable (Journal of Research in Personality, vol 32, p 431), with several studies suggesting that around half of the variation in openness scores is a result of genetic differences. Some traits that are linked to openness, such as being sociable, are also known to be influenced by the levels of neurotransmitters in the brain. And levels of these chemicals are controlled in part by genes. So while there isn't a gene for liking hippies, there is probably a set of genes that influences openness, which in turn may influence political

Second, your "rule" permits one to disregard those who don't have ideas. For example you seem to believe that your have ideas based on your reading of the Founding Fathers. I disregard what you say because I already have that wisdom. Your saying that Madison thought this generally or that specifically isn't an idea any more than your "distrust" is an idea.

An idea is something new. When Lincoln freed the Slaves, that was a new idea about the power of the Executive. You make no attempt to reconcile such with Madison, et al, nor does your model take Lincoln's actions into account in its attempt to explain change or innovation.

And, to the contrary of your view, a substantial argument exists that the South hasn't made any progress in the last 150 years. What does that unhappy fact do to your theory. Use Google Earth to locate all of America's nobel prize winners.

I could go on and on and on, but what would be the point. Because of the way people work they reject hearing the truth when people say what they think are ideas are not or will not work or are bad.

As for your believing that you are having thoughts about health care, you are not. Very bright people within and without the various institutions making up the health care system have thought through all the incentives and approaches. For example, you struggle about how to "how do you determine how many sonograms?"

A substantial part of that answer would come from the data, if we practiced evidence based medicine in the United States, which we do not do. In fact, your post makes it plain that you really don't understand the health care system at all.

To the lay person, the little part of the health care system observed leads to the belief that medical practices are uniform and evidence based. Neither is true. If you are trained as a heart surgeon at John Hopkins you learn entirely different approaches than those taught in Texas. There is substantially less sharing of information than you would imagine, for doing such is not in the economic self interest of many participants.

The point of the word, "Overdiagnosis" is that health care is drive by two factors: (1) incentive based bias; and (2) Munger's man with a hammer syndrome.

Smarter people than you have tried to turn the sow's ear of "conservatism" into a silk purse.

You entire mental model for thinking about these problems is incorrect. As others have posted, the roadmap, to the extent there is one, is the common sense and checklists of Munger and Franklin and similar thinkers